State House Sound Bites

Capitol reporter Mary Wilson covers Pennsylvania politics and issues at the Pennsylvania state capitol.

For cities in Act 47 program, a proposed way out

Written by Mary Wilson, Capitol Bureau Chief | Sep 18, 2013 11:47 PM

A task force charged with revising the state's more than 25-year-old program for fiscally distressed municipalities is getting ready to recommend legislation. The Act 47 program, established in 1987, was meant to take in cities that were on the brink of financial ruin. It has just shown to be not so adept at ushering stabilized cities out.

Rep. Chris Ross (R-Chester) is co-chair of the panel suggesting changes. He said the group will likely recommend creating a deadline for Act 47 municipalities to leave the program.

"If they don't have anything hanging over them in the way of a deadline - if it's an unpleasant, unpopular decision that they have to make - choosing between a couple of unpleasant or unpopular alternatives, the temptation will be to put off that decision," Ross said. "With a five year deadline, there will be a greater incentive to maintain control of their governance."

Cities that haven't improved their situation have made progress could get a three-year extension, or they could move on to more drastic measures, like going into state receivership, filing for bankruptcy, or disbanding as a municipality.

Other, perhaps splashier, proposed revisions to the program could include a levy on what goes on at the bar. Local governments admitted into the state's Act 47 program are already allowed to raise income taxes. But the task force will likely recommend that lawmakers approve a new menu of tax alternatives - including as much as a 10 percent tax on the sale of alcoholic drinks and six-packs.

The other co-chair of the panel, Sen. John Eichelberger (R-Blair) said the drink tax option is meant to help cities that might otherwise have to raise taxes that damage the business climate.

"They may lose businesses over it, they may prohibit other businesses from moving in, based on what they do during that time period, and we wanted to make sure that didn't happen," he said. "So this is an attempt to keep the business environment viable."

Ross agreed, saying that a commuter tax and a kind of payroll tax are also among the recommended alternative levies to the earned income taxes Act 47 cities are now allowed to increase to come up with extra revenue when they're in distress.

With additional tax controls would come with the additional recommended tax options. "So that we make sure that they don't either knowingly or unknowingly target a certain sector of the economy and impose an undue burden on them," Eichelberger said.

Officials have long criticized Act 47 for leaving troubled local governments to languish. 27 municipalities have entered, but only six have left the program.

This post has been edited to amend information about proposed deadlines and corresponding criteria for exiting Act 47. 

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